Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2008-02-01
Number: 08-015/2
Author-Name: Haris Munandar
Author-Email: hmunandar@bi.go.id
Author-Workplace-Name: Bureau of Economic Research, Bank of Indonesia, Jakarta, Indonesia
Title: Heterogeneous Agents, Human Capital Formation and International Income Inequality
Abstract: The paper examines the effect of heterogeneity in individual human capital formation on cross-country income inequality. It considers a two-country model of overlapping generation heterogeneous economies with the following features: (1) individuals are heterogeneous with respect to inborn ability and parental human capital; (2) intergenerational transfers take place via public investment in education financed by tax, and parental education; (3) due to variation in individual human capital, we have endogenous heterogeneity both in labor supply and in parents’ participation in self-educating their offspring. Besides exploring cross-country variation in public education, how its low level can lead to a poverty trap and how its high level can result in an increasing society’s effective human capital, we study the effects of capital markets integration, in equilibrium, on the intra-generational income inequality in both the investing and receiving countries.
Classification-JEL: D91; E25; H52
Keywords: Heterogenous Agents; Human Capital; Poverty Efrap; Income Inequality
File-Url: http://papers.tinbergen.nl/08015.pdf
File-Format: application/pdf
File-Size: 340585 bytes
Handle: RePEc:tin:wpaper:20080015